Time to buy dollars: trend reversal is ahead. Currency rate projection for August

Author

Diana Polunina

The hryvnia exchange rate in July showed appreciation, reaching less than 27 UAH per dollar. In general, the American currency depreciated by 0.34 UAH—to 26.88 UAH, and the euro—by 0.42 UAH, to 31.92 UAH.

According to analysts interviewed by , such an appreciation of the hryvnia will last for about a month, and with the beginning of autumn, a trend change should be expected—the dollar will begin to win back positions. At the same time, in August, the rate may drop even to 26.5 UAH. Read more about the expected situation in the foreign exchange market next month in ’s article.

Why the hryvnia is strengthening

In July, the hryvnia exchange rate against the dollar appreciated to its lowest level in the last year—to 26.86 UAH. According to the analyst of the investment company Concorde Capital Evgeniya Akhtyrko, last month the trend of moderate revaluation, which the Ukrainians have been observing since the beginning of the year, continued, but it came to a halt slightly in the first half of July.

"Most likely, the sentiments of the currency market participants were negatively affected by the news about personnel changes in the National Bank. However, at the end of the month the exchange rate strengthening resumed. Obviously, this was facilitated by the news about the increase in the NBU's discount rate," she notes, adding that the fundamental factors balance in the market has not changed: demand for currency remains moderate, while supply is supported by high exporters' revenue that is now at its highest since 2014.

However, according to the managing partner of Atlant Finance, Yuriy Netesanyi, this situation will continue for about a month, and a change in trend should be expected from the beginning of autumn.

What will have an impact on the dollar in August

In August, no significant changes in the fundamental factors balance are expected, Akhtyrko says. However, in her opinion, the strengthening of the psychological factors effect on the eve of the new business season is possible. Thus, some market participants may start buying foreign currency for future use in anticipation of the seasonal rise in the rate in the fall.

And Netesany outlines the following positive factors having an impact on the rate of exchange:

raising the NBU discount rate to 8%—this will lead to a decrease in liquidity (the amount of hryvnia in circulation), which will reduce the opportunities for buyers of foreign exchange on the interbank market, and to a reduction in the demand for foreign exchange;
seasonality. Traditionally, from April to September, the hryvnia appreciates due to an increase in exports and a decrease in imports, and that leads to the fact that the sforeign currency supply exceeds the demand in the interbank market;
period of settlements with the budget. In order to fulfill their obligations to the state at the end of each month, exporters are forced to sell more currency on the interbank market in order to settle taxes and fees with the state;
reducing the demand for currency to pay off dividends. Non-residents are now buying quite a bit of currency to pay dividends to their shareholders and parent companies;
favorable weather conditions for harvesting and food export;
additional placement by Ukraine of $500 million worth of Eurobonds maturing in 2029 at 6.3% which is a good signal for the market;
increase in the volume of emigrants’ private transfers compared to the figures of the previous year, and that increases the foreign currency supply primarily in the cash market, and later on in the interbank market.

The purchase by the National Bank of surplus foreign currency on the interbank market is among the negative factors. It should be noted that the more the hryvnia appreciated, the more the regulator will buy it. Such actions of the NBU will not allow the national currency to strengthen over 26.5 per dollar UAH. A negative factor will also be the fact that on August 28 the state should repay hryvnia bonds in the amount of almost 1.17 billion UAH and pay interest on four other issues, and on August 29—foreign currency securities in the amount of about $350 million.

At the same time, Oleksiy Blinov, the Chief Economist of Alfa-Bank, says that the rate will be influenced by the enterprises’ payment of profit tax that takes place before August 20. And that can lead to a situational appreciation of the hryvnia.

"However, expectations from August are opposite because at the end of the month we are moving to some seasonal weakening due to the increased demand for currency that is associated with the import intensification in the fall".

Oleksiy Blinov

Chief Economist of Alfa-Ban

Oleksiy Blinov

Chief Economist of Alfa-Ban

Dollar rate forecast in August

Netesanyi and Blinov predict that the dollar may depreciate to 26.5 UAH in August. For instance, Atlant Finance predicts the rate at the level of 26.5 — 27 UAH, since the regulator, with the help of foreign exchange interventions, will not allow the hryvnia to increase more than these figures. But Blinov gives a broader forecast—from 26.5 to 27.7 UAH, explaining this by the fact that every year at this time some of the enterprises simply sell foreign currency to pay income tax.

In turn, Akhtyrko does not agree with the experts—she expects the rate to be at the level of 27—27.2 UAH per dollar.

Euro and ruble rate forecast in August

The value of the euro will traditionally depend on events in the global financial market. According to Netesanyi, in August the rate in a wide range should be expected at $1.17—1.20, and in a narrow range—$ 1.18—1.19. The euro against the hryvnia in a wide corridor is expected at the level of 31—33, and in a narrow one, where the euro will be the main part of the month,—31.5—32.5 UAH per euro.

As for the ruble, Russia is in a fairly good situation at the moment—the gas price is $400 per thousand cubic meters, the cost of oil is over $70 per barrel. Soon the Russian Federation will launch Nord Stream 2, so the expert anticipates the value of the Russian currency during August in the range of 0.36—0.37 UAH.

Is it worth buying dollars and euros in August

"August will be one of the best months to buy currency this year. One can buy the dollar at the level of 26.5—26.7 UAH, as well as the euro at the level of 31—31.5 UAH.